Edtech startup Skill-Lync lays off 225 employees
Byju's, the world's most-valued edtech startup, has started laying-off staff, all over again. Reportedly over 1,000 permanent employees, including from mentoring, logistics, training, sales, post-sales and finance wings have lost their jobs in the latest exercise. This cost-cutting measure comes in the wake of mounting pressure from its lenders. However, barring a few firms, the pace of firing in the startup ecosystem has reduced substantially. Many are reporting reduction in the cash burn rate. For instance, ecommerce firm Meesho reduced its cash burn by 90 per cent in the last one year. Paytm recently averred that there would be no more cash burn in the business as the payment major is reorienting itself. Reports suggested that SoftBank-backed startups in India reduced their costs by 50-75 per cent since 2022, which is seen as a measure to conserve their ability to withstand the prolonged funding winter. Meanwhile, the global economic environment shows a mixed trend. There was a pause by US Federal Reserve after 10 consecutive rate hikes. European Central Bank raised rates by 25 basis points in its recent policy action. Back home, the Reserve Bank of India maintains status quo in policy rates. These policy actions indicate that central banks globally are factoring in a softening inflation in coming quarters. Taking cue, equity markets in major economies are witnessing solid investors’ participation. Indian equity market is at the cusp of scaling a new high amid sound FII inflows. Oil prices have cooled up from the high level seen during Russia-Ukraine war.
These economic indicators reflect some optimism among major stakeholders. Will this optimism translate into fund flow for the startup ecosystem? This is a question for which many are seeking answers. Many industry experts opine that green shoots have started to emerge. Fund flow into equities is usually a precursor to fund inflow into other risky assets. Currently, many PE and VC firms are sitting on billions of dollars and waiting to deploy that money. However, the subdued sentiment is making them nervous, and cautious. Once the market comes to a risk-off mode, these funds will definitely see deployment. In that case, Indian startups will be well positioned to attract new investment.
Another school of thought is that recovery is still far away as many European economies have entered into recession in the last quarter. With no end in sight to the Russia-Ukraine war, inflationary pressures will not vanish so early. While both these arguments are logical, the market has its own mind. Just like a slowdown, a recovery doesn’t give any early indications. One hopes that bullishness in the equity market translates into startup ecosystem. So far, earnings of companies have been a mixed bag with some sectors doing well, while others are lagging behind. Till sentiment improves with inflation tamed down, a full fledge earnings recovery will not be possible. In such a scenario, it is a wait and watch time for all sectors of global economy. Hopefully, the world should see some recovery trends towards the second half of this year.
